The SEC settles with a trader accused of spreading false information while selling short on the stock of Alliance Data Systems.

NEW YORK (Reuters) - Securities regulators said on Thursday
they settled with a Wall Street trader accused of intentionally
spreading false rumors about the planned acquisition of
Alliance Data Systems Corp (ADS.N: Quote, Profile, Research) while selling the stock
short.

Paul Berliner, 32, formerly associated with Schottenfeld
Group LLC, agreed to settle the civil case without admitting or
denying the allegations, the U.S. Securities and Exchange
Commission said in a statement.

The SEC said Berliner would disgorge $26,129 in profits and
interest and pay a maximum penalty of $130,000. He is also
barred from association with any broker or dealer.

Blackstone Group LP (BX.N: Quote, Profile, Research) agreed on May 17, 2007, to buy
Alliance for $81.75 a share, but the deal collapsed this month.

Berliner, according to the SEC complaint filed in the U.S.
District Court in Manhattan, used instant messages to 31
traders at brokerage firms and hedge funds to spread a rumor on
November 29 that ADS's board of directors was meeting to
consider a revised proposal from Blackstone to acquire their
company at $70 a share.

The rumor spread quickly as "the media and certain
subscriber-based news services quickly picked up the 'story'
and further disseminated it throughout the marketplace,"
according to the complaint.

The result was that ADS's share price plummeted to $63.65 a
piece from $77 and Berliner profited from the rumor even as he
was spreading it by short-selling ADS stock, the complaint
said.

SEC Chairman Christopher Cox said agency investigators were
able to wade through e-mails and instant messages and track
down Berliner within a week.

"I don't think there's a better example of how fast the SEC
can work and do its electronic forensics," Cox said during an
appearance on CNBC.

Cox said the case also demonstrated how seriously the
agency takes market manipulation.

"Rumors and market information are close cousins," he said.
"What we're after is people who are fabricating things
knowingly."

Cox declined to comment directly on whether the agency was
investigating similar negative rumors about investment bank
Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research), but said "you can expect
whenever there are very big issues in the market, the
Securities and Exchange Commission is paying close attention to
them."

Calls to Schottenfeld Group seeking a comment were not
immediately returned. Berliner's lawyer was not immediately
available for comment.